Spanish Government’s Apology to Catalonia Creates Concerns For Forex Transactions

The ongoing issues surrounding the Catalonia region of Spain attempting to become independent have caused some worries in the forex market. This especially came as the Spanish police took control over the region in a crackdown on the independence referendum. The recent development has made it to where it might be difficult for the European Union to stay stable, thus impacting the forex transactions involving the euro.

 

The Spanish government issued a formal apology to those in the Catalonia region for the excessive abuses that the police engaged in during the referendum. Even with this, the national government has deemed the referendum illegal and invalid in spite of a majority of people in Catalonia voting to separate from the rest of Spain.

 

The euro has since relaxed following the Spanish government’s full apology. This relaxation of the currency comes as the relations in Spain appear to be slightly eased. But there is still a sense of uncertainty that can be noticed in the economic climate.

 

Euro zone bonds have increased in value as a result. Most euro zone bonds with 10-year yields went around 3 to 4 bps higher on the day. This is a natural impact as such bonds could change in value depending on what happens within the ongoing economic climate.

But what has become a significant worry to the euro comes from Catalonia’s ongoing efforts to try and become independent. Although the relations within the country have been slightly controlled, there are still worries that the relationship between Catalonia and the rest of the country could be strained as Catalonia continues to move towards separating itself from Spain.

 

The Spanish government is aiming to keep the euro under control by allowing individual firms that are based on Catalonia to have the option to move to Madrid. Such efforts are being used to simplify the relocation process without producing significant issues.

The greatest fear of Catalonia becoming independent is that it might cause the rest of Spain’s economy to weaken. This could dramatically impact the euro and influence any euro forex transactions that might develop over time. This threat could be rather sizeable depending on what happens.

 

The potential for the euro zone to be harmed in the future would be significant if Catalonia splits off. However, it is still a sign of the rising nature of populism. As more people are aiming to focus on their individual country efforts above all else, there is a potential for other countries to possibly move out of the European Union just like what happened with the United Kingdom last year.

 

Analysts are being encouraged to take a look at how the ongoing activities in Catalonia are evolving to get an idea of how the market sentiment for the currency might be. The threat of Catalonia moving along as an independent nation is important to notice. It could especially be a sign of other actions that might develop in the future depending on some of the attitudes that people hold with regards to what Catalonia is going through.

Written by Michael Fox

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